Australian government forecasters got it wrong

The Australian Financial Review of 14 April 2011 (page 8) revealed that a committee of forecasters from government departments underestimated the impact of the Global Financial Crisis (GFC) on Australia's economy in September 2008.

The Joint Economic Forecasting Group Committee, comprising senior officials from Treasury, the Reserve Bank of Australia, the Department of Prime Minister and Cabinet, the Finance Department, and the Australian Bureau of Statistics prepared forecasts as the GFC was emerging.

They advised that growth in the 12 months to June 2009 would slow to 2% - well above the actual outcome of 0.6%.

After underestimating the impact of the GFC in September 2008, they went on to overestimate the impact in 2009 - see All "credible" economic forecasters got it wrong.

All of this is more than just a joke about bureaucrats.  Monetary policy and government fiscal policy were set on the basis of these two wildly inaccurate forecasts within the space of 12 months.  The resulting policy decisions were deeply flawed.

Charlie Nelson
April 2011

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